Goodbye Auto Loan!

Time to bust my hands out of one set of shackles. After 48 months of owning my car, with “strings” attached to them, I decided to snip that little thread to be free and clear. I remember every so often, I would look back and think, “I should have never bought my car and taken a loan out to do so”. Well, at least now I have decided to at least take out the last part of that statement there. Goodbye Auto Loan!

The loan

Back in July/August of 2013, I thought it was a great idea to buy a car. Everyone was buying a car, Bert, another close friend at work, a few relatives, the list goes on. My Toyota Celica (1997) had almost 215,000 miles on it and I didn’t feel as safe as I once had in the car. After a month or two of research, I stumbled upon my good old Honda Accord (2010) that had 43,100 miles on it and financed the car, with no money down, at a rate of about 2.29%. At that time, that was a damn good interest rate for a used car. However, I made a decision to stick the loan out for 66 months, the max I could go without altering the interest rate. In short-form, that is 5 years and 6 months. How insane was I to preserve capital for other investments at that time? Even my girlfriend’s auto loan was only 36 months and she even paid that off a few months early.

I was determined, earlier this year, after months/years of b****ing about the auto loan and how I wish I never had it, to get rid of it, methodically. I wanted to rid the handcuffs that were shacked on me, every time my hands gripped the wheel. I wanted one less thing to worry about, one less website that was in my “Finance” bookmark folder and to see one less outgoing cash flow on a monthly basis. I don’t want to owe anyone anything and this was a challenge I was taking out.

The plan

From that point in April, I set up my Auto-Loan debt repayment plan to be set for 6 months in order to be completed by end of September. Keep in mind, my auto loan was to be completed by February of 2019 (YIKES!), therefore, if completion by September of 2017, I would shave off 17 months. This would save approximately $105 in total interest as well, not the greatest return/savings, but money saved nonetheless.

I knew that it would take quite a bit of capital to rid the loan in 17 less months than originally planned, but I decided to say screw it and Just Go For It. As we have posted, the Side Hustles have helped bring in a few more extra dollars to be used towards this loan as well, making it “easier” in a way. However, the stock market was showing less signs of opportunities (to note, there always can be value found!), and I wanted to make use of my capital in some way, shape or form. In addition, having my auto loan currently does nothing for me (at the moment) from a tax-benefit perspective. That is what made this the more logical move. Further, and not the least reason, a car is a depreciating asset that is beneficial if it is able to get you from point A to point B, in my book.

Therefore, instead of paying in 66 months, I wanted to finish this off in 49 months, or just a tad over 4 years, instead of the almost 6 years. This would further open up $284 per month in new cash flow over that time period, as well and could have potential in a reduction of auto insurance. I am very excited to making Every Dollar Count in the pursuit to financial independence, and this was a stepping stone here.

Auto Loan kill and conclude thoughts

Without further-ado here are the screen shots below, showing my defeat of the auto-loan in August of 2017 (one month earlier than my goal). I was able to defeat the opponent in 48 months, shaving off 18 full months from this “relationship”.

Going forward, I plan to have my car, if no destruction of the car happens, for another 5+ years and if possible, at least 10. I have been able to reduce my driving to around 700-800 miles per month vs. my previous ~1,500 miles, due to renting cars for work purposes when traveling (vs. driving my car). In addition, I have battled with the question on the best use of unlocked cash flow and it becomes quite simple. I am going to invest when there are opportunities, if no opportunities I see exist, I can stack capital or potentially pay down the mortgage (always the question/debate!).

I am gosh damned excited about putting this to bed and to rest, and to now have an even bigger savings target with a reduction of this outflow of cash on a monthly basis. Auto Loan, we are done and I hope to NEVER see you again.

Now, has anyone else gone through this same scenario? Would you have done what I have completed? Are you currently hating your auto loan situation and have debated doing something about it? Please comment below or shoot us a message on twitter for your thoughts! And, as for this article, good bye auto loan!

Great stuff Lanny! I also used to have a car loan (took it only for 2 years though) and it was a great feeling when I finally got rid of it. I think using it for another 10 years might be a bit too optimistic, but there are definitely some more extra years in it that you can drive debt free!

Nice, 24 months goes by very fast, 48 though… “woof”. I couldn’t imagine going the full 66, yikes. Of course, I am 4 years in, if I’m 35 and am still driving this bad boy, I’ll be very happy. I have reduced my mileage quite a bit, per month, to less than 800. That should increase that longevity a bit.

Dude, that’s awesome. I can’t wait till I get rid of my car loan because all that cash flow will be nice to get back. I still probably have another 20 months to go with the regular payment schedule but I’ve been tossing extra payments towards it here and there just to get it off my plate even though the interest rate is near 0.

HELL YAH! Tossing that extra money, already reducing the life of the loan = awesome. You are bettering your position, regardless, and that’s what it’s all about. I understand that it can be hard when the money is cheap or in your case, free. However, knowing and seeing cash go out on a car is interesting and something I will never try to do in the future. Get after it, you got this.

Great job! I remember having a loan on my truck and after awhile I almost started resenting my purchase because of the loan! Feels great to be done! I too paid mine off as quickly as I could…think in about 3 years. Now my wife and my vehicle have been paid off for about 4 years or so and I don’t think we’ll ever take out another loan again. Thanks for sharing and CONGRATULATIONS!

Wow, another 4 years without payments, hell yah. Never again, right? I cannot imagine swallowing the auto loan pill ever again after this 48 month run. Glad to have one less site to also log into to make sure the payment goes through. Monkey off the back and I am now looking forward to having a few months of no auto loan under the belt.

Hmm… well, at least your trailer-home you can live in, as well as an RV – a car, however, cannot. Also – you can rent out your trailer home and an RV to others, and really get serious cash flow, you know?

Congrats Lanny! Though I might be a little biased, because I have the exact same car (with 113k miles), but you made a great choice in car. Paying debt on “depreciating assets” like cars would be particularly painful to me…..and I am glad you are free of that burden. I hope you have a great week. -Bryan

Congrats on another milestone. I remember my last car payment for my own Honda a while back. It felt good to get that monkey off my back and like you I also ended my relationship earlier by making two and sometimes three payments in a month. I think it’s crazy that average loan terms for cars have gone up well beyond 60 months. Like the 40 or 50 year home mortgage 70+ month car loans are becoming the norm. Finishing your payments early was a good move. Now, just take care of that baby.

You are right on with it and glad you had a Honda in the past as well. I have heard more 72 month loans that my stomach cares to desire to hear. I am in the banking industry and when we hear about programs that are above 30 year mortgages, I just shake my head thinking how much happens in 365 days, let alone 40-50x that… woof. haha.

And yes, time to take care of “her” and to make sure the Honduni treats me well back. Honduni isn’t the name of the car, but thought it sounded cool.

Congrats on freeing up that extra cash flow every month! Great to see you have this goal in the pocket. We’ve had a car loan once, around 5 years ago, but we paid it off as quickly as possible and within 6 months time. Since then I never want to have a car loan again 🙂

Lanny, I’m super happy for you. I don’t have a car loan at the moment because I don’t have a car. But, I can understand the feeling of paying down a debt and also not having a car payment to worry about. I think you made the right choice. I agree that the car, as a depreciating asset, does nothing for you, in terms of adding to your overall wealth. So, kudos to the fact that you’re able to pay it off so early.

Thank you for th ecomment. If you don’t need a car, never get the car – is my recommendation.

I obviously could have drove for Uber/Lyft to make some cash on it, but adding the miles would sting quite a bit. Excited that I can look outside at the car and think – only tires, oil changes, brakes and gas for you buddy. Knocking on wood, obviously. In the end, it’s a car, it’s another possession we own, you know? Bah.. kills me!

Congrats on eliminating your auto loan Lanny! That is awesome! I have been lucky as to have never had a need to own a car thus far. So I avoided all the expenses that come with it. But way to go freeing up your cash flow! 🙂

This is a great example of the “personal” aspect of personal finance. The cold hard math says you probably shouldn’t pay that off early. You could reasonably expect a much better return than 2.3% from any number of different investments.

But removing the burden of the monthly payment and the debt hanging over your head represents a psychological value that’s obviously worth more than the $100 in interest you saved.

It’s hard (maybe impossible) to assign a dollar amount to that type of abstract value…but it’s not nothing.

Yep, you are right. The math would say don’t do it, but there’s a psychological impact here and it may even motivate a person further to find more cash to invest still, so that in the end – the motivation came from the paydown of debt, which still continued to fuel the investment. It’s weird, isn’t it?

I would say VERY hard to assign a dollar to that value. I think that would have to be a very subjective/personal calculation for oneself. I would have to say, right?

Lanny, That is pretty darn awesome. I am excited to crush debt myself, putting a little towards my house and car each month. However, I cannot lie – I do dream about a cash windfall just obliterating some debts. – Gremlin

Thanks for the comment. A Cash windfall would be gladly accepted and welcomed at my household, haha. Every dollar matters & counts, and being able to chip at what you can each month, will count and add up. You are making an impact now and for your future self, no doubt.

Congrats! Well done. I started the same journey about a year ago with the plan to crush a loan within a year. Managed to finish it off at the beginning of June. I forgot I took out a 6 year loan (same percentage as the 4 or 5 if memory serves). After 2 years of paying it I was ready to be done. I held the previous car for almost 15 years. Hoping to hold this one for a while and putting a few dollars aside into a separate piggy bank so I can minimize the loan in the future 🙂

Thanks for sharing your comment and story. That’s awesome and sick. Plan was 12 and you did it in 5, I am assuming? So you stuck it out as long as you could go and then you were fed up with it. You have some longevity to your cars – keep that up with the current one you have. Nice work and keep saving those $’s!

Thanks for the comment. I was very happy removing that link from the bookmark finance folder on the bookmark bar.

I plan on saving/investing going forward with it. If the market doesn’t show opportunities, I will place it towards the mortgage or an experience. It opens up opportunities, and that’s what is great/fun about it all!

Congrats! That Honda accord should last a long time driving less than 1000 miles a month. I had one last 220,000 miles before it got rear-ended and totalled. As long as you change the timing belt on schedule it should go over 250,000 miles.